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Exam 4: Individual Income Tax Overview, Dependents, and Filing Status

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Question 21

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Qualified dividends are taxed at the same rate as ordinary income.

A) True
B) False

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Question 22

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Doug and Lisa have determined that their tax liability on their joint return is $3,700. They have made prepayments of $1,000 and also are entitled to a $2,000 child tax credit. What is the amount of their tax refund or taxes due?

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$700 taxes due ($3,7...

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Question 23

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It is generally more advantageous for liability protection purposes for a married couple to file separately than it is for them to file jointly.

William and Charlotte Collins divorced in November of year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of year 1. William provided 70% of Autumn's support, Diana provided 20%, and Charlotte provided 10%. When the time came to file their tax returns for year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective AGIs for year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?

For filing status purposes, the taxpayer's marital status is determined at what point during the year?

When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self-support provided by the child.

The relationship test for qualifying relative requires the potential qualifying relative to have a family relationship with the taxpayer.

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items?

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

Michael, Diane, Karen, and Kenny provide support for their mother Janet who is 75 years old. Janet lives by herself in an apartment in Los Angeles. Janet's gross income for the year is $3,000. Janet provides 10% of her own support, Michael provides 40% of Janet's support, Diane provides 8% of Janet's support, Karen provides 10% of Janet's support, and Kenny provides the remaining 32% of Janet's support. Under a multiple support agreement, who is eligible to claim Janet as a dependent as a qualifying relative?

If no one qualifies as the dependent of an unmarried taxpayer, the unmarried taxpayer may still be able to qualify for the head of household filing status.

Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses?

In April of year 1, Martin left his wife Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for year 1?

To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer.

The relationship requirement for qualifying relative includes cousins.

A personal automobile is a capital asset.

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative for Charles (Charles claims Demarcus as a dependent on his tax return). Charles qualifies for head of household filing status.

Jasmine and her husband Arty have been married for 25 years. In May of this year, the couple divorced. During the year, Jasmine provided all the support for herself and her 22-year-old child Dexter who lived in the same home as Jasmine for the entire year. Dexter is employed full-time, earning $29,000 this year. What is the Jasmine's most favorable filing status for the year?

A taxpayer who is claimed as a dependent on another's tax return may not claim any dependents on his or her tax return.